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© Imagination Technologies FY15 AGM 18th September 2015 2
FY15 highlights Group
Strong licensing across all IP families
Significant increase in committed SoCs
Operating costs lower than previously guided
Technology
Significant new tier-one deals for PowerVR graphics & MIPS
Encouraging year-on-year MIPS volume growth
Growing momentum for Ensigma
Significant design wins secured for Platform offerings
Pure
Narrower focus in product lines & geographical presence
Improving performance in key markets
Business well positioned for future growth
© Imagination Technologies FY15 AGM 18th September 2015 4
Financial highlights - 1 Technology revenues growing
Licensing: up 2% to £39.0m (FY14: £38.3m)
Royalties: up 9% to £118.9m (FY14: £109m)
Licensing: increased activity across all IP families
121 licenses (FY14: 115) signed across more than 40 partners
52 PowerVR multimedia
47 MIPS processor
15 Ensigma communications
7 System level/support IP (including FlowCloud, VoIP and Caskeid)
Platform IP capability gaining traction and fuelling momentum
© Imagination Technologies FY15 AGM 18th September 2015 5
Financial highlights - 2 Shipments: 1,327m units (FY14: 1,259m)
Non-MIPS: 530m (FY14: 530m)
MIPS: up 9% to 797m (FY14: 729m)
Stronger average royalty rate on both non-MIPS and MIPS unit shipments due to mix
Operating expenses
Underlying operating expenses tightly controlled
Better than guidance, with growth of only 9% for the full year
Foreign exchange
The average USD foreign exchange rate has been broadly neutral from FY14 to FY15
© Imagination Technologies FY15 AGM 18th September 2015 6
Group adjusted profit & loss
FY15 FY14 Change
£m £m %
Revenue
Licensing 39.0 38.3 2%
Royalties 118.9 109.0 9%
Pure 18.4 23.2 (21)%
Other 0.7 0.3 133%
Total revenue 177.0 170.8 4%
Gross profit 159.3 150.4 6%
Gross profit margin 90% 88%
Underlying operating expenses (138.2) (126.4) 9%
Adjusted operating profit 21.1 24.0 (12)%
Adjusted operating profit margin 12% 14%
Net financing expense (3.4) (0.3) 1033%
Adjusted profit before tax 17.7 23.7 (18)%
Licensing revenue robust Non-MIPS royalty revenues grew, despite flat unit volume MIPS unit volume and royalty revenue strengthened year on year Underlying operating expense growth better than guidance Net financing expense includes FX movement on USD loan
© Imagination Technologies FY15 AGM 18th September 2015 7
Technology business
£m
£5m
£10m
£15m
£20m
£25m
£30m
£35m
£40m
£45m
FY11 FY12 FY13 FY14 FY15
Licensing
£m
£20m
£40m
£60m
£80m
£100m
£120m
£140m
FY11 FY12 FY13 FY14 FY15
Royalties
£m
£50m
£100m
£150m
£200m
FY11 FY12 FY13 FY14 FY15
Revenue
Royalties Licensing Other
0
200
400
600
800
1000
1200
1400
FY11 FY12 FY13 FY14 FY15
Unit v
olu
me
in
mill
ion
s
Units
Non-MIPS MIPS
Licensing: strongest
year despite lower
growth than expected
Units: strong growth
in MIPS; stable
non-MIPS
Royalties: solid
growth in royalty
revenues driven by
volume and mix
© Imagination Technologies FY15 AGM 18th September 2015 8
Pure
FY15 FY14 Change
£m £m %
Revenue 18.4 23.2 (21)%
Adjusted operating loss (6.0) (7.4) (19)%
Improved focus:
Areas of strategic interest
Products & geographical
regions
Markets & products with
better returns
Revenue reduced but
improved profitability
© Imagination Technologies FY15 AGM 18th September 2015 9
Reconciliation of adjusted to reported profit
FY15 FY14
£m £m
Adjusted profit before tax 17.7 23.7
Share based incentive costs (11.9) (13.2)
Amortisation of intangibles from acquisitions (9.1) (8.6)
Investments - gains and impairments (5.1) (2.2)
Acquisition related items (1.1) 0.4
Corporate restructuring costs (0.7) (0.4)
Release of contract obligation 0.8 -
Provision for onerous supplier contracts (2.5) -
Reported (loss) before tax (11.9) (0.3)
Tax (charge) / credit (1.1) 1.1
Reported (loss) / profit after tax (13.0) 0.8
Loss on investments
due to revaluation
Tax: overseas tax
charge partially offset
by capital allowances
credit
© Imagination Technologies FY15 AGM 18th September 2015 10
Group cash flow
FY15 FY14
£m £m
Adjusted profit before tax 17.7 23.7
Depreciation 8.2 5.8
Other (1.2) (1.6)
Operating cashflows before working capital 24.7 27.9
Working capital (28.8) 6.0
Cash generated by operations (4.1) 33.9
Interest (0.5) (0.6)
Tax (1.2) (58.4)
Net cashflows from operating activities (5.8) (25.1)
Cash flows from Investing activities (15.0) (27.2)
Cash flows from Financing activities 3.4 (5.3)
Net (decrease)/increase in cash (17.4) (57.6)
Effect of exchange rate fluctuation 0.9 0.2
Opening cash position 19.2 76.6
Closing cash position 2.7 19.2
£25m operating cashflow Working capital movements due to timing of royalty receipts – reflected in debtors at year end Capital expenditure primarily related to the redevelopment of property Over £60m of property assets (offices and data centre) Short term utilisation of RCF over period end to cover timing of royalty receipts
© Imagination Technologies FY15 AGM 18th September 2015 11
FY16 outlook as at 30th June Licensing
Based on increased backlog and active pipeline of prospects,
target of 10% growth in licensing revenue in FY16
As usual dependent on timing of partners’ activities
Royalties
Expect growth in unit shipments and royalty revenue
Pure
Expect continued improvement in financial performance from refocus and operational
changes already implemented
Operating margin & expenses
Expansion of operating margins in medium-term with longer-term target of 30% - 40%,
with a rise in profitability in FY16
Full year operating expenses growth target in the range of 5% - 10%
© Imagination Technologies FY15 AGM 18th September 2015 12
Summary of Interim Update Licensing:
Steady start to the year
Increase in overall pipeline
Holding guidance at this stage
Royalties:
June quarter impacted by overall slowdown in semi industry and customer-
specific ramp down timing
Strong recent and ongoing design wins expected to create significant added
momentum in mid-term unit shipments
Pure:
In line with expectations
Operating costs:
Tightly managed; marginally lower than expectations
Overall H1 looking weaker, but H2 expected to be stronger than previously expected
© Imagination Technologies FY15 AGM 18th September 2015 14
Market opportunities evolving & emerging Existing markets growing & changing
Mobile phones and computing => maturity, low-end shifting up
Home consumer => connected devices, connected consumers
Enterprise and networking => ubiquitous connectivity,
heterogeneous compute
Automotive => connected, advanced automotive
New markets emerging – no established players
Wearables
IoT: health, energy, agriculture; transport; retail; security; toys
Automation & robotics
VR (Virtual Reality) & AR (Augmented Reality) becoming significant
Real-time and big data analytics SoCs remain the key enablers
System know-how the key differentiator
Products + cloud services are disruptive combinations
© Imagination Technologies FY15 AGM 18th September 2015 15
Mega societal changes underway The arrival of the emerging world
China, India, Brazil - size matters
More consumers but also more competitors
The connected and accessible world => one market
Accelerating technological possibilities in many fields
IoT, robotics/automation, biomedical etc - even bigger than Internet
Global warming and the need for efficiency and conservation
Manufacturing returning to local markets in many sectors
The rise of the middle-class world and people’s expectations
Towards 100+ year human life spans and changing demographics
Today’s infrastructure cannot cope with tomorrow’s population’s needs
© Imagination Technologies FY15 AGM 18th September 2015 16
The semiconductor world is changing
Consolidation in established markets
Mostly in West and Japan
Largely driven by mobile market consolidation
Rapid rise of players in emerging economies
Western companies investing in eastern partners
Trend towards OEM verticalisation in several markets
Driven by SoC-level differentiation
New semis even closer to applications
Have to become much more than just a semi
Picture of change
Flags of China, TW
© Imagination Technologies FY15 AGM 18th September 2015 17
The developing landscape: four types of “semi” players
1. The super-high volume (SoC) semi Supporting large mainstream segments, driven by mobile
SoC capability and/or proprietary architecture driven
2. The market focused, specialised semi Smaller and operating closer to more specialised applications
Auto, Health, Home Automation, Industrial/Enterprise, …
3. The vertical major OEM brand with internal semi SoCs + Cloud are key enablers & differentiators
Branded products covering multiple segments
4. The “partnership” vertical OEM, Service Provider, Brand Replicating vertical model (category 3) but through partnership
Custom SoC => an enabler and a differentiator
Medium to large scale
© Imagination Technologies FY15 AGM 18th September 2015 18
IoT - very large but fragmented
The breadth of applications means no one
player will dominate
Tier-one “walled garden” communities will be
first to develop and service adjacent markets
Service level interoperability and security will
be real growth enablers
Ecosystems of many different skills will be
essential to create solutions that really work
Still early stage - too much re-branding of
existing technologies and products as “IoT”
Both open communities and walled gardens
IoT - in reality not one market
© Imagination Technologies FY15 AGM 18th September 2015 19
Security is another fundamental hurdle Every application has security demands
Fundamental to all connected devices (including IoT)
Today’s solutions simply don’t meet users and
application needs
Simplistic “binary in/out” model no longer good enough
Since so many don’t understand it, most copy others
who claim they do
We need universal solutions to security
Heterogeneous - goes across every processing element
in the SoC
Multi-domain for multiple co-existing apps
Multi-domain, system-wide security will become a must
© Imagination Technologies FY15 AGM 18th September 2015 21
IoT – where we can make a real difference
We see three main levels:
Sensor hubs (application specific)
Sensor hubs + audio/voice
Sensor hubs + audio/voice + smart vision
Biggest impact where solutions address major societal issues
Health
Energy Transport
Infrastructure Security
&Safety
Retail
Agriculture
Our silicon IP portfolio addresses the
needs of all of these key markets
Connected processors central to all hubs
Smart cameras & audio demand
complex local processing
GPU
Video
Camera ISP
+ S
ma
rt v
isio
n
Audio + A
ud
io/v
oic
e
RPU
CPU
Co
nn
ec
ted
P
roc
es
so
r
© Imagination Technologies FY15 AGM 18th September 2015 22
Enabling IoT solutions
SensorHub
Flo
wR
adio
Flo
wTalk
3rd P
arty
FlowCloud
M2M Services
• Registration
• Device Mgt
• Device History
• Event History
• Device App logs
• Authentication
• Authorisation
• Storage
• Device Messaging
PaaS using open source framework
Software as a Service
Service Market place
Built in metering
Subscription plans
Devices IoT Applications (SaaS)
• Wi-Fi
• BT / BTLE
• 6LowPan
• Thread
• Brillo
• OpenWRT
Sensors 3rd P
arty
3rd Party
© Imagination Technologies FY15 AGM 18th September 2015 23
Today’s security solutions are inadequate
Only secures the CPU
Only one secure zone
Proprietary hardware
All secure apps in the same zone
One CPU-centric secure zone is not enough
Trusted Hypervisor
Unified Memory
Root of Trust
Communications
GPU graphics and compute
Central Processor
So
C F
ab
ric
Secure:
Payment
Media
Health
Utility
Secure zone
Open:
Maps
Games
Non-secure applications
© Imagination Technologies FY15 AGM 18th September 2015 24
OmniShield™ redefines the future
Multi-domain: up to 255 containers
Heterogeneous: CPU GPU, RPU
Hardware separation: virtualisation
Open: prpl Security PEG
Multi-domain, heterogeneous, hardware separation
Trusted Hypervisor
Unified Memory
Root of Trust
Communications
GPU graphics and compute
Central Processor
So
C F
ab
ric
Secure:
Payment
Media
Health
Utility
Open:
Maps
Games
Non-secure applications
© Imagination Technologies FY15 AGM 18th September 2015 25
Helping our customers leverage their know-how
Domain Solutions Customer
technologies & know-how
Customizable IP platforms Ecosystems
software, tools, apps, middleware, hardware
Scalable IP
PowerVR Multimedia
Networking Enterprise IoT Smart Home
Connected Cars
Wearables Mobile
© Imagination Technologies FY15 AGM 18th September 2015 26
PowerVR multimedia Graphics, Video & Vision Processor IP families
Significant & growing market
1bn+ growing to >5bn
Clear leadership in mobile graphics for mid-high end;
growing in the low end
Series7: starting volume production
Series8: in an advanced development stage; strong customer interest
No 1 supplier for automotive dashboard display
Significant and growing volume in TV/STB
Strong volume in video including 4K
Continuing to innovate
GPU compute, VR, AR, ray tracing, computer vision
Ray Tracing reference chip in the lab; initial tests promising
Vision IP Platform: strategic and significant
Acknowledged technology &
industry leaders
© Imagination Technologies FY15 AGM 18th September 2015 27
MIPS processors Strategy since acquisition:
Existing customers: networking & digital home
Reassured and relationships strengthening
Mobile: new market wins
Secured strategic design win for embedded processing in mobile SoCs
App processing opening up as ISA dependency a non-issue medium-term
Automotive: MobilEye leading ADAS supplier – MIPS-based
Embedded: Microchip key player in IoT, 32-bit MCUs
Customers acknowledging commitment of Imagination
Tier-ones see MIPS as strategic; new key multi-year design win
Shipment strength continues across markets
Strong technology with compelling roadmap
Strong line-up from micro-controllers to 64-bit => real choice
Multi-threading & OmniShield => differentiation in many markets
The industry’s much-needed
& welcomed choice
© Imagination Technologies FY15 AGM 18th September 2015 29
Ensigma communications
Efficient & scalable comms IP family
Explorer RPUs for highest performance Wi-Fi & BT
Wi-Fi 2x2ac now in production in partner’s products
New Whisper RPU cores targeting ultra-low power for
IoT and wearables
Uniquely positioned for the industry’s
transition to integrated comms IP
Similar transition to that we saw in graphics
Complete end-to-end solution
Software to antenna
Industry’s largest centre of excellence
~ 200 engineers focussed on connectivity IP
10+ licensees & growing
Several entering production in 2015
A massive opportunity as
connectivity transitions to IP
© Imagination Technologies FY15 AGM 18th September 2015 30
IP platforms: addressing the emerging demand Pre-verified solutions - enabling the next wave of innovation
Customisable
IP Platforms
Differentiated
Customer SoC
Optimal OEM
products Scalable IP
PowerVR graphics
MIPS processors
Ensigma communications
PowerVR video
PowerVR vision
Scala
ble
& S
ecure
Fabric
Graphics & GPU Compute
Video decode & encode
Wi-Fi, BT TV, Radio
CPU processors
Camera ISP
Peripheral IP
Pre-verified baseline SW
Unique SoC
Domain know-how
Fa
bric
VDE
CPU VPU
Peripherals
Baseline SW
Customer IP
RPU GPU
3rd party SW
Partner SW
© Imagination Technologies FY15 AGM 18th September 2015 31
Focusing on the essentials Significant operational changes; improving financials
Losses reduced and key trends look encouraging
Using DAB line-up and brand to drive adoption
Extensive new product line-up announced at IFA:
- Evoke F3 with BT and Spotify; new One range; Siesta Rise
bedside radio; Evoke C-series all-in-one home audio systems
Targeting international consumer & automotive markets
Driving connectivity (Wi-Fi for internet radio, BT for streaming)
Strategic support for key technologies and partnerships
E.g. wireless speakers including multi-channel and IoT
Have revised partnership model for music service to optimise cost
Engineering supporting technology ecosystem growth
Supporting IP business for Creator Ci20, Caskeid, …
© Imagination Technologies FY15 AGM 18th September 2015 32
Leverage & profitability
Imagination’s operating margin expansion
Planned strategic investment in complementary
technologies =>impacted short-term margin
All planned product lines are now in place
=> we’re at the end of major new investments
All business units either already in or entering revenue
generation
Ongoing tight & systematic control of Opex
– now sub 10%
Margin expansion => longer term goal 30%-40% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Time
Develop-ment
Market Entry
Maturity Research Phase
£m
PowerVR
Ensigma
MIPS
IP product profitability profile
Long investment cycle
Slow initial revenue ramp (licensing only)
Accelerated later royalty + licensing ramp
© Imagination Technologies FY15 AGM 18th September 2015 33
Summary Technology
Strong and comprehensive range of IP addressing all target applications
Solution-centric IP platforms that efficiently address the needs of all customers
Well aligned with the trends in the market and opportunities
Pure
Business rationalised and focussed on areas of strategic & financial significance
Group
Many opportunities and active licensing engagements across all IP families
Some short-term softness in customer unit shipments but expect growing momentum for
mid-term
Leverage within the business model will enable expansion of operating margins with a
long-term steady state of 30%-40%
Business well positioned for future growth